Short Sales From The Home Affordable Foreclosure Alternatives Program–Will More Short Sales Be Offered In 2011?

Short sales from the Home Affordable Foreclosure Alternatives Program have mostly been pursued by homeowners who were in an underwater situation or who may have been unsuccessful at finding a foreclosure prevention program through modification efforts, but could find a buyer for their home even if an underwater mortgage situation was present. Typically, homeowners have sought out short sales when negative equity was the problem, but there are some indications that more servicers may attempt to get homeowners to agree to a short sale in the coming year as more of these institutions are seeking to avoid the foreclosure process.

According to an article on HousingWire.com, it is “predicted that short sales could increase 50% industrywide this year.”  This could be the result of continued problems for homeowners who will ultimately face foreclosure or the result of a more proactive approach by mortgage servicers to offer this form of assistance to homeowners who are facing financial troubles due, again, to negative equity or unemployment.

Understandably, homeowners who are struggling to pay their home loan have primarily looked to modification efforts in order to find affordability in their mortgage payments, but homeowners have often found that factors like the loss of their home, joblessness, or other mortgage troubles have made them a good candidate for a short sale program, but reports state that many of these homeowners have had to come to their servicer, rather than servicers taking a more active approach. Suggestions to better the HAFA short sale program are usually in the form of servicers helping homeowners sell their home instead of requiring that a homeowner come to their bank with a buyer.  Also, there have been cases where some homeowners were denied a short sale and faced foreclosure, but many feel that allowing these short sales can be less costly to both a servicer and a homeowner.

Recent changes in the HAFA short sale program, most notably removing restrictions that required that certain income requirements be met, are said to have produced positive results but it’s hoped that as more homeowners face continued home loan troubles associated with unemployment or negative equity, these new changes will bring about further options for homeowners to escape a formal foreclosure as banks may either suggest a short sale or aid the homeowner in advertising their home in the hopes of completing a short sale.

Foreclosures are, sadly, predicted to remain a problem for many homeowners in 2011, but with these new rules from HAFA and short sale efforts by banks, it’s hoped that more homeowners will be prompted to pursue these foreclosure alternatives rather than being resigned to the fact that they must face foreclosure when they can no longer afford their home.